Gold heads for steep weekly loss as oil prices fuel Fed rate concerns

Gold eased on Friday, headed for its steepest weekly decline in over four months as elevated oil prices bolstered higher-for-longer interest rate expectations, while investors awaited next week's Federal Reserve policy meet. Spot gold eased 0.2% to $4,016.27 per ounce by 0351 GMT, paring losses slightly after touching its lowest level since July 20 earlier in the session. The metal has fallen 3.5% so far this week, which is poised to be its worst since June. US gold futures for December delivery dropped 0.7% to $4,030.40. Speculators are trying to defend the key $4,000 level for gold because a clean break below would signal that the market has stopped pricing rate relief and started pricing sticky inflation, elevated yields, and a stronger dollar, said Monte Safieddine, head of market research at Capital.com. Oil prices rose about 4% to a five-month high on Thursday after Houthi attacks on Saudi Arabia stoked concerns of further disruption to energy supplies. Elevated energy prices bolster expectations of higher-for-longer interest rates by the Fed, increasing the opportunity cost of holding non-yielding bullion. "Any further escalation on the geopolitical front risks pushing oil even higher. Higher oil is reviving inflation fears, lifting yields, and delaying Fed easing. That is a difficult cocktail for bullion," Safieddine added. Focus has turned to the Fed's October 27-28 policy meeting and next week's Personal Consumption Expenditures (PCE) data, a closely watched gauge as it is the central bank's preferred inflation measure as it targets a 2% inflation rate. Traders are largely expecting the central bank to leave interest rates unchanged next week, but expectations for an interest rate hike in December remain at 80%. Meanwhile, analysts at HSBC cut their average 2026 platinum and palladium price forecasts in a research note on Thursday, citing shifting market fundamentals and investor liquidation. Among other metals, spot silver slid 1% to $53.98 per ounce, platinum fell 0.1% to $1,568.58 and palladium steadied at $1,054.50. All three metals were headed for weekly declines.